Banks lead Europe stocks higher

Cable & Wireless Worldwide surges 15% on bid talk

LONDON (MarketWatch) — European stock markets climbed Thursday, with banks extending gains in the wake of the previous day’s injection of long-term liquidity by the European Central Bank before a surprise drop in U.S. manufacturing data trimmed gains.

The Stoxx Europe 600 index (SXXP) closed 1% higher at 267.06, after trading as high as 267.33 earlier in the day.

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“There is not one main driver for the rise today. Stocks rise on a broader theme that it’s only risky assets that generate returns at the moment as government bond yields are really low. Because what’s the alternative? If you don’t invest in risky assets like equities you’ll lose to inflation,” said Henrik Drusebjerg, senior strategist at Nordea Bank.

“This rally will continue until we see bad news about the economic recovery. My only concern is that analysts have started to lower corporate earnings forecasts, and it’s rare that stocks rise, while companies make less money,” he said.

Posting one of the biggest gains in Europe, C&W Worldwide (CW.) surged 14.7% after Tata Communications Ltd. (500483) confirmed earlier speculation that it was mulling an offer for the U.K. telecom firm.

Vodafone Group PLC (VOD) last month said it’s mulling a bid for C&W Worldwide. A spokesperson from C&W Worldwide declined to comment. Vodafone shares rose 1.5%.

The U.K. FTSE 100 index (UKX) ended 1% higher at 5,931.25. Man Group PLC (EMG) soared 12.7% after reporting an increase in funds under management for the first two months of 2012 to $59.5 billion and said investor sentiment has improved since the end of last year.

Mixed bag of macroeconomic data from U.S. and Europe

Markets came off their intra-day highs in afternoon trade after the Institute for Supply Management said its U.S. manufacturing index fell to 52.4% in February from 54.1% in January, missing analysts expectations of 55%. Read more about ISM manufacturing

Separately, initial, weekly U.S. jobless claims fell by 2,000 to 351,000, broadly in line with expectations, while consumer spending climbed 0.2% in January after no movement the prior month. Read more about jobless claims

U.S. stocks traded higher on Wall Street.

In Europe, the Markit purchasing managers index for the euro zone came in unchanged from a preliminary estimate and showed activity in the region shrank at a slower pace in February.

Separately, consumer prices grew at 2.7% annual rate in February, edging up from 2.6% in January, the European Union statistics agency Eurostat reported. January unemployment rose to 10.7% from an upwardly revised 10.6% in December.

Italian banks rally after LTRO

Italian banks were among the best performers in Europe after reportedly tapping the European Central Bank for 26% of the money borrowed Wednesday by the region’s banks in the central bank’s second three-year long-term refinancing operation.

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